Ipca Labs Q3 Review - Domestic Formulation Outperforms; API, Branded Exports Underperforms: Motilal Oswal

Motilal Oswal Report

Ipca Laboratories Ltd. delivered operationally in-line Q3 FY24 performance. It continues to deliver robust YoY growth in the domestic formulation segment.

However, this is offset by deceleration in exports, active pharma ingredient business.

We cut our earnings estimate by 9%/4%/4% for FY24/FY25FY26 to factor in-

1. prolonged subdued outlook in the API segment,

2. lower off-take in branded generics segment, and

3. reduced operating leverage.

We value Ipca Labs at 23 times 12 months forward earnings to arrive at a price target of Rs 1,080.

Ipca Labs remains on track to deliver better-than-industry growth in the domestic formulation segment. Its efforts are underway to rebuild U.S. business from its site, given successful compliance in place.

However, the branded generics segment would need enhanced efforts to improve growth prospects.

We estimate 17%/27%/45% sales/Ebitda/profit after tax growth over FY24- 26. The current valuation adequately factors in the upside in earnings. We reiterate our Neutral stance on the stock.

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